How to Save Yourself in this Recession

[AroundTheWorld]

As time goes on, I am learning that more and more people are facing very difficult financial times. It is one thing to hear about the recession in the news, but another thing entirely to feel the pinch yourself and start to realize that many of the people that you know are also feeling the pinch.

It can be a difficult thing to talk about. Some people have had the courage to talk about their situation here, others choose to weather the storm quietly. Which ever the route, I am realizing that the problem is becoming more widespread.

It is a part of life as an investor or business owner. We are greatly influenced by economic conditions. We have multiple tenants and / or customers that impact us - not just one boss or one company.

I would love to see a brainstorming session get started here.

What can people do if they find themselves in a negative cash flow situation?
What can we do when our business slumps off or our vacancy rate skyrockets?

Let's share some strategies.

 

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[AroundTheWorld]

These are some of the things we have done:

• Get an Accurate Picture. This first requires taking an honest look at the financials. What are the assets? liabilities? What assets have money coming in? What assets have money going out? It is really difficult to know how to solve it when you don't know what "it" is.
  
• Accept the Situation and develop a Grateful Heart for all you have. I posted about my experience with this here.
  
• Minimize Expense.
  
  1. Eliminate the unnecessary expense items.
  2. Go to your lenders and ask for a loan modification. Lenders DO NOT want your property. If you lay it on the line, most lenders will be willing to work with you, particularly if you have a plan for the future.... a plan for turning things around.
• Outside the Box Thinking. Give yourself room to solve your problem with creative solutions...
  
  1. Ask yourself: How Can I? (rather than saying, I can't)
  2. How can I find a tenant?
  3. How can I get rid of this house?
  4. How can I use my strength to generate more income?
  5. Can this asset be used in a different way?
• Lay Yourself Off. If you have a business, lay yourself off and file for unemployment while you work on new income sources
• Evaluate your Portfolio / Business. Will it endure a long lasting recession? Does the model still work? Do you need to change / adapt it for the future?

Anyone else? What are you dong? What is working for you? What isn't? I know that I have talked with some of you, and you have had amazing breakthroughs in the last month... Want to share?

Or, if you are stuck in a sinking ship.... what is keeping you stuck? What is the obstacle? Let's brainstorm some solutions!

 

[marktech101]

Do you want to know what I honestly think? Frankly, I'm almost glad we're having a recession. Don't get me wrong; I don't want people to suffer or anything. I just know that hopefully by the time I graduate college and truly enter the Fastlane (in 2014), the recession should be over and I should be able to catch the economy on an upswing. If it lasts 10 years (2008-2018), then I'll have 4 years to get my act together and execute a plan. It's going to make me millions!

--marktech101

 

[Runum]

Ya know Sonya I have been finding this interesting. I guess it's human nature. We make a killer deal and everyone hears about it. We run into a bumpy patch and no one hears about it. I think it gives others the illusion that successful people never have bad deals or tough days.

Some days it's tough to separate perception from reality. I know that my tenants are having some tough times. That's a reality. The news tells me and everyone else how bad things are and is going to be. That's perception. So then I start panicking and worrying about keeping it all together. That's irrational and not productive.

I do know that I go over my financial books a lot more often to prove to my brain that we are doing fine. I have spoken to my bank about one of my properties that is giving me a little trouble right now but could become a problem but it also may not.

Another thing I do is talk with my wife about our drop dead, total emergency plans. How would we make it? She was real good about helping me with that. She can pinch a penny till it screams. That plan covers that extreme situation.

So with a total loss plan and a tread water plan in place it gives me the peace to sleep at night and work during the day, or visa versa.

 

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[AroundTheWorld]

Do you want to know what I honestly think? Frankly, I'm almost glad we're having a recession.

--marktech101

There are positive parts of recessions for sure...

It can serve as a correction of bad habits. It can teach us all important lessons about leverage and just how dependent we are on the economy. It teaches us to have a backup plan and a back up to the back up.

And, yes.... there will be another season of growth, once this season of retraction is done.

The purpose of the thread is a BRAINSTORM and PROBLEM SOLVING SESSION.

Let's please stick to that.

Thanks.

 

[AroundTheWorld]

Ya know Sonya I have been finding this interesting. I guess it's human nature. We make a killer deal and everyone hears about it. We run into a bumpy patch and no one hears about it. I think it gives others the illusion that successful people never have bad deals or tough days.

I agree! And, that is something I am trying to change within myself. I know from my own experience, and from speaking with other successful people that it is very much a part of the journey. Why are we hesitant to talk about it? Ego? I don't know. But, I think we do ourselves and others a disservice if we don't share that bad with the good.

The news tells me and everyone else how bad things are and is going to be. That's perception. So then I start panicking and worrying about keeping it all together. That's irrational and not productive.

I think that is another key. SEEK BALANCE.

Acknowledge the negative portions of your own situation, but don't dwell on them.
Move on to solutions.

Practice Gratitude for the abundance in your life, but don't sweep the trouble under the rug.
Face it Head On.

Don't let other people's situations (positive or negative) color your view of your own situation.

Thanks Runum.

 

[Runum]

I agree! And, that is something I am trying to change within myself. I know from my own experience, and from speaking with other successful people that it is very much a part of the journey. Why are we hesitant to talk about it? Ego? I don't know. But, I think we do ourselves and others a disservice if we don't share that bad with the good.



I think that is another key. SEEK BALANCE.

Acknowledge the negative portions of your own situation, but don't dwell on them.
Move on to solutions.

Practice Gratitude for the abundance in your life, but don't sweep the trouble under the rug.
Face it Head On.

Don't let other people's situations (positive or negative) color your view of your own situation.

Thanks Runum.

I do think it's ego in most cases. No one wants to be portrayed as a loser. Trump made a bunch of money publishing a book about his rise from his financial problems.

ATW, you have a way with words I wish I had. Thanks for phrasing it like that. I can't seem to get my thoughts into short sentences.:cheers:

 

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[Kung Fu Steve]

I think we just need to re-evaluate the reasons (or offers) for our products. To put it simply we all need to work on our sales pitch. I have not really felt a pinch in my business, it is not a "necessary" business by any means, but I make it necessary to people. Times tough? Instead of paying for that vacation why not invest in your child's future, or your future for that fact and work towards attaining a black belt. Discipline, Respect, Attitude, Confidence, Responsibility.. how can you really put a price on these things? And I certainly teach them well.

As far as a place to rent I would think you could promote it as a SAFE place. It's not going to be taken by the bank, you will be able to stay there without having to worry about rents sky rocketing, and you could definitely tell people that their payments are going to be far less than a house, they can save money in these "turbulent" times! It's the smart move to rent!

As far as other products go; how will it save you money? Luxuries may not be on the mind of everyone these days because they are worried about an economy that they don't understand what's going on.

So all in all, I would work on the sales pitch. :smxB:

 

[AroundTheWorld]

Trump made a bunch of money publishing a book about his rise from his financial problems.

Which book?

 

[AroundTheWorld]

So all in all, I would work on the sales pitch. :smxB:

Ug. Do I really have to? (she asks, already knowing the answer)

Never been one of my favorite things.

 

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[Runum]

Which book?

I think it was The Art of the Comeback. I read it many years ago. It's not all pretty but he does show that it can be done.

 

[biophase]

Obvious solution is to simplify your life. I sometimes wish I had to pay only 1 rent bill and utilities at the end of the month. Problem is that as we grow, so do the bills. Paying 6 mortgages and then waiting for the rent is not fun.

One of my biggest things that I did before was to lower overhead. I know that's just tough to do with a real business. My online businesses are differently as they run on under $50/mo. My plan is to keep providing avenues of income to myself without shelling out much money.

Then after that, I agree with KungFu that its all about sales. This is a game. Everyone is trying to hold onto their money. You need to convince them to give it to you. If they buy, you win.

 

[biophase]

One thing I forgot to mention.. I think that a business that runs on making other people money will thrive now. What I mean is that if you can find leads for businesses now, they will pay for them. After all, sales is the big game right now.

 

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[rcardin]

WhenI finally went to college as a serious student( after 5 colleges and almost 10 years of playing) I picked a major that I knew would not be affected by economy, lay offs, down sizing, etc. I chose Elementary Education. As a male i knew I could always find a job if I needed it.

Now 10 years later I couldn't be happier with my choice in these times.

As far as my tenants go I have to change the way I look at them. As the guru I studied says " Renters are aliens from another world" I just have to think like them. They will pay late just to pay the cable bill on time.

In this turbelent time do I want to chase after late payments or just be glad they are paying close to on time?
in the good times I would try to squeeze the extra 50 bucks out of them. Now I am worried if put too much pressure on them they will just bail on me and I now need to do a make ready and find a new tenant. this is where the economy would affect me. I really don't have the extra cash that I would want to divert to these situations so better to avoid the situation if possible.

If they both went vacant at the same time it would be a terrible squeeze on the family. if the situation arose I would definitely rent them for whatever I could get just to get some relief. I can squeeze an extra 500-600 out of the budget to cover a loss but I can't find 1700 in the budget to cover two properties sitting vacant.

 

[andviv]

rcardin, I understand your situation.

In my case, the pain comes from within. The feelings of failure (especially those that you inflict on yourself) are the worst to overcome.

Decisions I made thinking they were the correct trigger regrets down the road as I feel that those that do the right thing get punished. While I chose to keep paying the mortgage when the renters left, others just walked away. Gosh, why I didn't just let everything go to hell at that time? why being responsible. It is true, "nice guys finish last".

Anyway, the picture looking forward is not good for my rentals. The blue collar neighborhoods are becoming ghost towns. The areas I invest in are dependent on the construction industry, and we all know what's going on there.

Actions that I've taken: Thanks to the mastermind group I am part of I was made aware of opportunities in the market. There is a new economy that is growing bigger and bigger every second. I am part of that industry, and I wasn't dedicating time to it as I thought the market was inundated of offers and there was no demand.

Thanks to the mastermind meetings I realized that, yes, there is a lot of offer to meet the demand, but that is only measured in quantity, not in quality. There is a gap for a quality service, and that is where I make a difference.

Also, I've been educating myself in a few other topics, I see a bigger demand coming and I will be prepared to provide quality service once again.

My advice during these times:
Talk, talk, talk. Network, network, network.

The mastermind group has been fundamental for both reasons, as a support group, and as a brainstorming environment. It is great to know you can count on others to help you, while you can satisfy your need of helping others at the same time.

 

[BeingChewsie]

We have cut expenses to the barest of bones, we have worked out a plan to eventually begin paying on the debt again with the creditors, we are having a fire sale on the house just to get rid of it to have money to pay something towards the debt.

I have started babysitting for the families around me on weekend nights just to have something coming in...it pays the grocery bill and some of the utilities. I'm still searching for new nurse detox contract and will continue too.

Mostly I have just let go and am just living with what we have, I'm just happy for the time I have to live here on the beach, I'm taking it month to month.

I'm sorry I don't have any ideas for business or income stuff, I'm not a business person nor am I good at thinking out of the box, the most I can offer are ways to help people cut expenses.

Sue

 

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[rxcknrxll]

I think it was The Art of the Comeback. I read it many years ago. It's not all pretty but he does show that it can be done.

the guy lost billions and didn't slow down. never let up. This economy we have today is when real multimillionaires are made. Sorry, but the majority of "wealth" we made as a nation the last several years wasn't real. Many users on this forum did it the right way, but on the whole, a lot of the money people think they're losing now was just a mirage to begin with. Real wealth doesn't come from nothing. I'd be the last to say it can't come quickly, but real wealth is something you've earned through having created value for others. Watching your mansion triple in value is not a true wealth-building activity. This slow down is exactly what needs to be happening right now. We've had several years of fantastic gains, now it's time to restructure, get back to basics and target new opportunities altogether. Opportunities that will take us to the next level.

 

[Edge]

You have to start by identifying what risks you can control and manage those risks. If you don’t feel like you can directly manage rental rates or occupancy, look to the broad economic factors that are impacting rental rates or occupancy and hedge down that avenue.

Are a large number of your properties in a metropolitan area that is being hit particularly hard by the recession? Are they in an area that you can trade CME housing futures on?

Contract Listings

If so, hedge that risk through using housing futures or options on housing futures.

Are your properties in an area that is dependent on a particular industry? If you are dependent on oil industry, hedge with oil ETFs, oil futures, or options on either. If the industry is semi mfg, hedge with that industry ETF.

Are your properties in an area that is dependent on a particular company? If so, it is probably a large publicly traded company, you know the drill.

Is there a REIT that closely matches your business plan or situation? Hedge by getting short that REIT through the stock or options.

Are your RE holdings commercial retail properties or shopping malls? Hedge with the stock of the stores that are in the mall or similar REITs.

Is your cashflow dependent on interest rates? There are treasury ETF and futures you can use to hedge this risk also.

 

[AroundTheWorld]

Damn, Edge. You are a smart dude. ++

 

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[RealOG]

the guy lost billions and didn't slow down. never let up.

I have mad respect for the guy, even if he is a sensationalist. One of my favorite quotes from that book is:

"I saw a vagrant sitting on the street begging for change. I realized that guy was worth $900M more than I was."
​

Another quote I love is when a reporter asked Trump, "Don't you worry about your situation?" to which Trump replies,

"Not really. I find it gets in the way of solving my problems."​

Not many folks can make a billion, lose it all, then do it again.

 

[AroundTheWorld]

- Lastly, be prepared to cut losses if/when necessary...don't let things snowball...

This reminds me of a conversation I had with a successful / seasoned hard money lender about a year ago.

He used to be into buying / selling / renting SFR's. He had a large portfolio of SFR's going into the 80's. He was hit hard by that and sold his homes one by one just to stay afloat. He finally got out from under his last house 8 years later. He had no net worth by the time it was all said and done.

He got into hard money lending after that and became successful.

Anyway... about a year ago he said that if he was in that situation again he would pocket the rent for as long as possible, default on the loans, and figure out how to start again. He figures that is a lot less painful then the 8 years he went through to end up in the same circumstance.

 

[phlgirl]

• Schedule more time for brainstorming/evaluation – we do this on a fairly regular basis in our house but in turbulent times, I think it is more important than ever. Schedule a weekly/bi-weekly meeting, in a comfortable setting – designate a note taker and let the ideas flow. Review your financials and discuss positives and negatives.
• Re-think your Marketing strategy – as others have mentioned, sales is key right now. For us, it relates to real estate rentals. We are seeing a decrease in the tenant pool (some of this may be related to time of year) and difficultly with existing tenants making payments on time. We are beefing up on marketing - posting flyers in local churches, libraries, and supermarkets, in addition to the newspaper ads and bandit signs. There is a huge new shipping port opening here in Jax – we are trying to come up with a method for attracting possible re-lo employees from these companies. We are also re-evaluating rents, when properties become vacant. I would rather have a tenant who is able to pay a lower rent consistently, than one who is stretching to make a higher rent, thus risking increased late-pays/possible evicition.
• Hedge – Edge – I love the way you think +++ When the news first started to get heavy, we did an overall analysis and shifted a few things. We bought some precious metals and are continuously working to increase our cash position.
• Housing – we are preparing for a move. In doing so, we are re-thinking our original plan. Sure, we want the penthouse in the sky but, perhaps, in these times, it might be smarter to keep things lower-key and allow ourselves a larger cushion. We are also debating the FL house. I will admit this is really tough for me. When it comes to investment real estate, I seem to be able to make cut and dry decisions. When it comes to primary (secondary) living, I have an issue removing emotion.
• Stay Active – I think it is important to stay active in every sense (business, personal, etc.) – it is easy to get stuck in a ‘wait and see’ mentality – particularly with so much talk of the need to‘hunker down’. People are staying at home more to cut costs. Too much of this can lead to depression. Take turns hosting dinners with friends, exercise, volunteer, take inexpensive day trips, go camping (okay, maybe not up north). Get creative!!

As always, great thread, ATW. Has been a while since I got excited about a new topic – knew I could count on you. : ) ++++

 

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[Bilgefisher]

1. Tighten the belt a bit. Don't just look at big ticket items. Many small things, like buying that $8 block of cheese, forgetting to turn out the light when leaving the room, turning the thermostat down 2 degrees, or taking the car when you could walk can really add up to a large expense.

2. Reevaluate your time vs money. Your time may not be as valuable (dollar wise) as it was before. Maybe some items you can do on your own rather then contract it out.

3. Look at everything you spend money on, either in the business or at home. Is there a way to improve or streamline that particular cost. Perhaps a monthly fee item now has a cheaper alternative. Look at those items you haven't changed in years. Car insurance for example.

4. Talk to your parents or grandparents or trusted friend that may have seen tough times before. What did they do? I'm always amazed at what my grandparents were able to get by with when they were struggling. Your not the first person to go through hard times. You may not have the experience, but surely others do.

5. Most importantly, count your blessings. Your lucky to have food and shelter and a safe place to live. (Watch "Slumdog Millionaire" if you need an added eye opener)


Great thread ATW, and welcome back Phlgirl. I enjoy your insight.

 

[rxcknrxll]

I have mad respect for the guy, even if he is a sensationalist. One of my favorite quotes from that book is:

"I saw a vagrant sitting on the street begging for change. I realized that guy was worth $900M more than I was."
​

Another quote I love is when a reporter asked Trump, "Don't you worry about your situation?" to which Trump replies,

"Not really. I find it gets in the way of solving my problems."​

Not many folks can make a billion, lose it all, then do it again.

true. Yeah the guy is not my style at all. He's a total media hound too, but whatever, he's got a thing that works for him. Everyone has their own brand of genius. It is a rare person indeed that has what it takes to make billions. Surely after some point ($500M or so?) it's gotta stop being about the money, you know?

 

[MJ DeMarco]

Here's a nice article that adds to this conversation:

Retail Rip-Offs & Sneaky Tricks - WalletPop

 

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[AroundTheWorld]

I wrote about this in a different thread, but another thing to do now is

renegotiate your loans!

 

[StreetsofSilver]

The people who came out of The Great Depression strong with a transfer of wealth were the people who were buying, not selling. America is on sale right now. Everyone knows that you should buy low and sell high. Instead of spending $50 on a new pair of shoes, I am using that money to buy stocks, metals, etc. There are some pretty great deals out there right now.

I do stress over the rental properties. I will have a vacancy next month. I may possibly have to do an eviction in another. It is all a learning experience. I am definitely going to start charging application fees to potential tenants.

When I stress out, I make myself stop and ask "What's the worst that could happen to me?" Even if I lost everything - I'd still have my family, friendships, experiences, etc. I could do it all over again from scratch if I had to.

 

[fanocks2003]

I would love to see a brainstorming session get started here.

What can people do if they find themselves in a negative cash flow situation?
What can we do when our business slumps off or our vacancy rate skyrockets?

Let's share some strategies.

Questions answered from top to bottom:

1) If they find themselfs in negative cashflow, but they are still earning money, then the only way of getting out of negative cashflow is by minimising fixed expenses as much as they can and in the meantime look for more income.

2) If business slumps off and/or vacancy rates skyrockets, then you need to ask yourself: How much do I have in cash to buy other cashflow streams with? This question really has to be answered before the accident happens. This is true for both RE and businesses. You need to actively create a hedging strategy in case something financially bad should happen.

 

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[StreetsofSilver]

Every obstacle presents an opportunity to improve
our condition.

If it's a vacancy: Many banks are willing to work with customers right now, rather than take the loss. Bonus, if your bank just got bought out by another because the new bank does not want to acquire new bad debt.

1. Call the bank that holds the mortgage and negotiate to get the interest rate lowered. Hey, you might get 2 points taken off.

2. Ask the bank to extend the payments for an extra X amount of years to make the monthly payment lower.


If it's lack of business: You need to advertise more. You are supposed to pump up your advertising campaign when people are not buying and tone it down when demand is good.

1. Radio. It's cheaper to advertise using the dj's voice and it is just as effective as a commercial. Plus it is easy to reach your target market.

2. Newspaper/Magazine. I am surprised that internet companies do not place ads in newspapers more often. Placing a print ad is still very cheap in comparison to other forms of marketing.

 

[randallg99]

...
If it's lack of business: You need to advertise more. You are supposed to pump up your advertising campaign when people are not buying and tone it down when demand is good.

1. Radio. It's cheaper to advertise using the dj's voice and it is just as effective as a commercial. Plus it is easy to reach your target market.

2. Newspaper/Magazine. I am surprised that internet companies do not place ads in newspapers more often. Placing a print ad is still very cheap in comparison to other forms of marketing.

I agree with above statement and want to add the fact that people are spending more time at home in front of their TVs instead of eating out at restaurants or entertainment venues due to contracting incomes.... which leads me to believe that television advertising may have the best bang for the buck today....

cable is getting awfully inexpensive today due to 2 factors: 1- competition from FiOS and Direct TV among others and 2- the downturn and downward pressure on advertisings' demand.

I don't know anything about national broadcasting though.....